A Rich Life

The Old Ideas on Saving & Investing Don't Work -- Here's What Does

“I Will Acknowledge That These Views Are Extreme If You Go By the Continuum of Viewpoints Held Today. But It Is Not Right for Me Not to Express My Sincere Views. If Everyone Who Holds This View Says to Himself ‘I’ll Keep It Zipped Until Lots of Others Are Saying This.’ The View Will Never Be Publicly Expressed. Someone Has to Be the First to Say These Things.”

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Set forth below is the text of a comment that I recently posted at another blog entry at this site:

From today’s post by you on this exact topic, which you agree can’t be proven one way or the other:

I am telling you what I believe, Anonymous. I stand by those words. If I said anything different, I would be telling you a lie.

I am not able to imagine any circumstance in which the promotion of Buy-and-Hold strategies would not cause an economic crisis. Once you tell people that there is no need to exercise price discipline, you have taken the brakes off the car and you are going to end up with a crash. Are you able to imagine a scenario in which you can drive a car without brakes to a happy conclusion?

I will acknowledge that these views are extreme if you go by the continuum of viewpoints held today. I have not heard anyone else saying what I say here. It’s fair to point that out.

But it is not right for me not to express my sincere views. It may be that there are many people out there today who share this view and are afraid to express it because they feel that they will be attacked for being too extreme. If the idea is going to be explored, we need to have people giving voice to it.

If everyone who holds this view says to himself “I’ll keep it zipped until lots of others are saying this,” the view will never be publicly expressed. I have a duty to say what I truly believe at every board and blog at which I post. Someone has to be the first to say these sorts of things. I wish it could be someone other than me. But. if no one else steps up to the plate, it becomes my job to do so. Someone has to get the ball rolling here. Shiller didn’t publish his research last week. It has been 33 years.

But I do NOT express this view or any other view in a dogmatic way.

I hold my views strongly but I do not hold them arrogantly. I often acknowledge that there are million of smart and good people who hold very different views. I often acknowledge that the Buy-and-Holders should be heroes to all of us and that we should feel respect and affection for them and be grateful for the important insights they have generated for our benefit. I often acknowledge that I have been wrong many times in my life and that it may be that I am wrong again. Those are not arrogant words, Anonymous.

I believe what I said. I believe it strongly. I have a right and duty to say precisely what I believe. A board community cannot achieve its potential unless every community member shares his sincere views. It is the interaction among a wide range of differing views (some on the extremes of the continuum and some in the middle of it) that creates a solid learning experience for all.

So there is nothing even a tiny bit wrong with me stating that opinion. If the opinion is foolish, it will be exposed as such. If the opinion has merit, that will become evident through the ongoing discussions. But the opinion that is sincerely held must be expressed accurately and in full strength for all the magic to happen. It would be wrong of me to state a view other than the one that I actually hold.

Dogmatism hurts us. I would be wrong to say “no one else may express a different opinion because it is so clear that I am right.” That crosses the line. I should respond to those who express other points of view with respect and warmth.

But I should of course NOT respond to those who engage in deception or intimidation tactics with respect and warmth. Those who post abusively hurt all of us. We all should be united in speaking out strongly against that sort of stuff.

I respect you for holding a different viewpoint. I do NOT respect you for posting abusively. When you post abusively, you degrade yourself. As your friend, I am compelled to urge you to stop doing that.

Rob

“The Amazing Thing Is That No One Had Done This Work Before I Came on the Scene. I Am Trying to Get More People Involved. It Is Important Work. And, Once Buy-and-Hold Falls, It Is Going to Be Very Financially Rewarding Work. My Thought Is That Anyone Who Holds Off on Taking Advantage of the Opportunity Is a Fool.”

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Set forth below is the text of a comment that I recently posted to another blog entry at this site:

if you make a wild causal claim like this, you must back it up with evidence. Can you point to any academic studies showing, or even trying to show this is true?

There is no direct evidence one way or the other. We cannot ask the market to sit down on the coach and respond to our questions.

The Buy-and-Holders BELIEVE that bad economic news caused low stock prices. They do not KNOW this. There is no study that SHOWS this. They arrive at this conclusion by following the logic of their theory, which is exactly what I do. Different theories lead to different beliefs about all sorts of questions.

If the Buy-and-Hold theory were correct, price changes would be random. They are not. So I throw the ideas that follow from Buy-and-Hold out and go looking for ideas that make sense given what the last 33 years of research tells us.

The research shows that the primary cause of price changes is changes in investor emotion. If that’s so, the best time to buy stocks is when investor emotion can only move in an upward direction. That’s when prices are low. When prices are low, there is zero risk because there is only one direction in which emotion (and prices) can move.

Do you not agree that, when prices fall hard, trillions of dollars of spending power leave the economy? Is there some doubt about this point?

If trillions of dollars of spending power leave the economy, would you not expect the economy to collapse? What else could it possibly do?

The point that I am making here is self-evident, Anonymous.

It is not self-evident to someone who believes in Buy-and-Hold. Buy-and-Hold posits that it is economic developments that cause price changes. But to someone who has given up on that idea because the last 33 years of research discredits it, what I am saying here is self-evident.

It’s as clear as clear can be. We once thought that things worked one way. Now we know that we were wrong. We are in the process of determining how things REALLY work. All of the work that I do at this site is part of an effort to explore the IMPLICATIONS of Shiller’s revolutionary finding of 1981.

The amazing thing is that no one had done this work before I came on the scene. Is that my fault? I am trying to get more people involved. I think it would be fair to say that, if you Goons stopped the attack stuff, I would be more successful doing that. It is very, very important work. And once Buy-and-Hold falls, it is going to be very, very financially rewarding work. My personal thought is that anyone who possesses the qualifications to do the job and who holds off on taking advantage of the opportunity is a fool.

Anyway — I certainly have as much proof to offer in support of what I say as the Buy-and-Holders have to offer in support of what they say. Please show me the study showing that it is economic developments that cause stock prices to drop. You believe it. I can give you that one. But you cannot provide a URL for a study because no such study exists.

I face this problem in lots of different areas. Buy-and-Holders act as if they are 100 percent sure of everything they say. But rarely do they have any evidence to point to in support of what they say. They just argue that “Everyone agrees about this” or some such thing. If what everyone thought was right, you wouldn’t see “revolutionary” findings like what we saw in 1981 from Shiller and in 2012 from Bennett/Pfau.

Mark Twain said that it is not the things you don’t know that hurt you the most but the things that you know for certain that just ain’t so!

Rob

“Most People Don’t Care About Theory. But the Experts Root Their Advice in Theory. And Most People DO Care About What the Experts Say. So in a Practical Sense Most People Today Are Following the Buy-and-Hold Theory. They Are Relying on a Belief That the Experts Are Shooting Straight With Them. And the Experts Are Deceiving THEMSELVES Because They Have So Much Riding on the Buy-and-Hold Theory.”

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Set forth below is the text of a comment that I recently put to another blog entry at this site:

We do agree on this, Anonymous.

Most people don’t care about theory. But the EXPERTS care about theory. The experts root their advice in theory. And most people DO care about what the experts say. So in a practical sense most people today are following the Buy-and-Hold theory. They are not dogmatic about it. And they do not know precisely why they are doing what they are doing. They are relying on a belief that the experts are shooting straight with them. They leave it to the experts to worry about theory.

I say that the experts are not shooting straight with them. It’s not that the experts are dishonest by nature. The experts are deceiving THEMSELVES because they have so much riding on the Buy-and-Hold theory; they feel that their entire careers are at stake if Buy-and-Hold is found to be deficient. The experts tell themselves that Buy-and-Hold is good enough and that it is okay not to trouble their clients and readers with discussions of the implications of Shiller’s findings. The ordinary investors don’t even know that there is an issue. They don’t look into things carefully enough to discover this. So, when I put forward views that are very much at odds with what the experts say, the ordinary investors see that what I am saying makes perfect sense but presume that there must be something wrong with what I am saying because if I were right the experts would be saying the same thing.

This is why I am always talking about the importance of Bogle giving an “I Was Wrong” speech. We need a major event that is widely publicized to turn things around. If Bogle gave such a speech and it were written up in all the major papers, all of the experts from that point forward would feel comfortable giving the Shiller take on things along with the Fama take on things. As more and more people came to understand the Shiller take, hundreds of blogs would pick up on these questions and we would see the launching of a national debate. We need to see a national debate re this stuff very, very badly!

I feel that you are suggesting a non-dogmatic approach to things. I can live with a non-dogmatic approach. But I am not clear re how what you are suggesting would play out when it comes time for me to compose posts.

Say that I am posting at the Bogleheads Forum. Someone comes on and says “I am about to retire and need to decide how much I am going to withdrawal each year.” Someone else posts a link to FIRECalc. What do it do?

Do I post a link to The Retirement Risk Evaluator?

How does Mel Lindauer respond when I do that?

Am I subjected to The Treatment?

Or does he let it pass out of deference to this new non-dogmatic approach?

I don’t feel any need to say “Buy-and-Hold is wrong” so long as there are no Buy-and-Holders saying “Valuation-Informed Indexing is wrong.”

If you are saying that we ALL should be non-dogmatic, I am cool with the idea. But Valuation-Informed Indexing cannot grow if, every time a VII idea is put forward, it is smashed down by people who claim that Buy-and-Hold is Scientific Truth. I need protection from that sort of thing. The protection that I have relied on in the past is the 33 years of peer-reviewed research supporting the VII strategy (and discrediting the earlier research that was thought by many to support the BH strategy). If we go the route you propose, do you intend to jump in when Buy-and-Holders say that their approach is Science and let them know that the majority of the board is non-dogmatic and that it is disrespectful to them to say that kind of thing? If not, how do you propose that I respond, given that I believe in Valuation-Informed Indexing and want to persuade people of its merits while also wanting to always be 100 percent respectful of the views of other community members?

Rob

 

“Could It Be That the Millions of Middle-Class Investors Will Be Excited Enough About the Huge Breakthroughs That You Goons Could Avoid Prison Altogether? I Don’t Think It Is Possible for Anyone to Know.”

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Set forth below is the text of a comment that I recently posted to another blog entry at this site:

Rob, I’m still unclear why, if you want to promote your views, you don’t just post on these boards in a civil way. What’s the downside?

We are working from opposite beliefs as to what constitutes civility or kindness, Anonymous.

The proper response from John Greaney when I posted about the errors in his retirement study was for him to say “Thank you!” to me for having the courage to act in a way that would save him future embarrassment by permitting him to correct his mistake and get it quickly behind him rather than seeing this thing dragged out for years and years. John did not thank me. And his other friends failed to insist that he do so. I did insist. That’s true friendship. It is through John’s failings and the failings of his other friends that we got on the dark path that led us to the horrible place where we are today.

On October 23, 2002, I engaged in a second act of charity. I put up a post demanding John’s removal from the community. Motley Fool had said that they wanted to see a community expression of a desire for his removal before they would enforce the published rules of the site which called for the removal of posters who put up death threats. We got 25 votes for removal. Motley Fool did not consider that enough and John stayed on.

That’s why he is in a place today where he is headed for a prison sentence following the next price crash.

Say that John had been removed back in October 2002. Six months later, I would have asked Motley Fool to reinstate him. I believe that I would have gotten most of our fellow community members to endorse that request and Motley Fool would have gone along. So all our troubles would have been over. We wouldn’t be worrying about prison sentences today.

There is nothing “mean” about the published rules of our boards and blogs. And there is nothing “mean” about the laws we have forbidding financial fraud. We put these rules and laws in place to ENCOURAGE civility. We need to see that they are enforced in a reasonable manner if we are to insure that civility remains the order of the day.

Because too few of us had the courage to do the right thing back in 2002, we are all in a big mess today. I don’t like it, you don’t like it, Bogle doesn’t like it, Shiller doesn’t like it. But here we are.

You are suggesting that the same cowardice that got us on this dark path will show us the way to a brighter path. I don’t buy it.

I talk about financial fraud and prison sentences not because I enjoy the thought of seeing you behind bars, Anonymous. I talk about financial fraud and prison sentences because I want us as a society to come to terms with what we have done over the past 12 years and to bring the ugly side of this saga to a full and complete stop. I don’t know what the length of your prison sentence would be if you were to come clean today. There has never before in U.S. history been a situation like this. So it is not possible to say. But I know that it is prosecutors who bring charges and I know that prosecutors feel a need to answer to public calls for action. So I believe that the best way to see that your prison sentence is on the short side rather than the long side is to do all that I possibly can do to make the millions of middle-class investors who have been done harm happy with their circumstances rather than angry about their circumstances.

Shiller’s revolutionary 1981 findings represent the biggest advance in the history of personal finance. If we go into the Second Great Depression, it will be the first optional Great Depression in our nation’s history. Shiller has told us how to AVOID a depression. It’s better than that. Shiller has shown us how to avoid all future economic crises, even those not bad enough to turn into depressions. It’s better than that. Shiller has shown us how to reduce the risk of stock investing by 70 percent. It’s better than that. Shiller has shown us how to invest so that we can retire five to ten years sooner than we ever imagined possible in the Buy-and-Hold Era.

It’s not possible to imagine how it could ever get any better than that.

If we shared what we now know about how stock investing works with the millions of middle-class people who have been done great harm during the 12-year cover-up of the errors in the Old School SWR studies, those millions of people would be far less inclined to demand prosecution of acts of financial fraud than they will be if the cover-up continues and we see another price crash.

Could it be that the millions of middle-class investors will be excited enough about the huge breakthroughs that you Goons could avoid prison altogether?

I don’t know. I don’t think it is possible for anyone to know.

What I know for certain is that, whatever your prison term will be if the cover-up continues until we see another price crash, it is going to be a lot less if you come clean before the close of business today. I have zero doubt re that one.

So I know how we need to proceed.

The way that I propose that we proceed obviously benefits me. But it does not benefit ONLY me. It benefits you Goons. It benefits the millions of middle-class investors. It benefits Bogle. It benefits Shiller. It benefits Pfau. It benefits Motley Fool. It benefits EVERYONE!

We are all in the same boat re this thing. There are no two sides. The idea that there are two sides is an illusion.

We need to stop thinking that there are two sides, recognize that we are all in this together, and work together to do what deep in our hearts we all know needs to be done here.

Am I going to become rich and famous as a result of us all taking the right steps? You betcha! And you know what? That’s just fine. That’s not a problem AT ALL.

Bogle will be ten times the hero following us coming clean than he is today. He is a popular guy today. But when Buy-and-Hold is revised in way that reduces stock investing risk by 70 percent, he will be ten times MORE popular. Bogle is big winners if we all come clean by the close of business today.

So is Shiller.

So is Pfau.

So are you Goons.

So is EVERYONE.

We have to go there. We all know it on some level of consciousness. None of us want this ugly stuff hanging over our heads forever and ever and ever. So we know what we need to do.

Now we just need to work up the courage to do it.

That’s my sincere take re this terribly important matter, in any event.

I wish you all good things, Anonymous.

Rob

Valuation-Informed Indexing #192 — Shiller Makes Some Dubious Calls in His Latest Interview

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I’ve posted Entry #192 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Shiller Makes Some Dubious Calls in His Latest Interview.

Juicy Excerpt: But again I think Shiller goes too far with the humility that comes naturally to him. No one knows anything for sure. That much is certainly so. But the full reality here is that Shiller’s work has helped us to become far better able to predict economic developments than we were before we had access to his research. If it is human psychology that drives stock prices and investor emotions remain out of control (as both the P/E10 metric and the discussions I participate in on discussion boards and blogs indicate to be the case), our economic future is more troubled than those who follow Fama’s way of thinking portray it to be.

There are things we can do today to ease those economic troubles that we will not be able to do if we wait until there is another price crash to try them. I would like to see Shiller spelling out in more detail what his findings suggest re our economic future and what steps we should be taking to steer things in the right direction.

Most investing experts are too arrogant and the few who aren’t have an inclination to be too humble!

“Wall Street Journal Columnist Bret Arends Is Saying That Those Pushing Buy-and-Hold Today Are Involved in a Massive Act of Financial Fraud. He Doesn’t Use the Blunt Language I Do Because He Knows What Would Happen to His Career If He Did So. But ‘Leaving Out Half the Story’ Is Financial Fraud. This Site Tells the Other Half of the Story.”

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Set forth below is the text of a comment that I recently posted to another blog entry at this site:

Tip: If you can’t link to a NYT or WSJ article about it, it probably doesn’t exist in the wider world.

If you take a look at the “People Are Talking” section of the site, you will come across a quote in which Bret Arends says in the pages of the Wall Street Journal that the Wall Street Con Men pushing Buy-and-Hold strategies 33 years after the peer-reviwed research showed that there is zero chance that they could ever work for even a single long-term investor are “leaving out half the story.”

Arends is saying that those pushing Buy-and-Hold today are involved in a massive act of financial fraud. He doesn’t use the blunt language that I do because he knows what would happen to his career if he did so. But “leaving out half the story” is financial fraud. The millions of people who have never heard the other half of the story are suffering in very serious ways. It was leaving out half the story that caused our economic crisis. Millions of people are unemployed today because of the decision by the Wall Street Con Men to leave out half the story of what the peer-reviewed research in this field tells us about how stock investing works.

This site tells the other half of the story, the half that the Wall Street Con Men leave out of their articles and speeches and studies.

Good for me for telling the full truth about these matters. I expect to become one of the richest men in the United States following the next price crash, when the massive act of financial fraud is exposed for all to see. I will offer no apologies for my the massive wealth I will have attained at that time. I will have earned it. There are millions of middle-class people who very much need to hear the full story of how stock investing works and I intend to bring it to them. And under our system I should be compensated in a huge way for being the first person to have the guts to do what has long needed to be done.

Those who are leaving out half the story while pretending to be “experts” are committing crimes under the laws of the United States. I am telling.

My best wishes to you and yours, Anonymous.

Rob

“The Wall Street Con Men Are Not Convinced That Buy-and-Hold Cannot Work. They See the Holes in the Concept. They Become Insanely Defensive When Challenged. But They Tell Themselves That Buy-and-Hold May Work Well Enough. They Tell Themselves That There Is Nothing Better.”

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Set forth below is the text of a comment that I recently posted to another blog entry at this site:

You say there’s a mafia intimidating thousands of people. This can’t be ignorance. It has to be people doing something somewhere.

It’s mostly ignorance. There are people doing things to perpetuate the ignorance, that much is fair to say. But ignorance is the driver here. The people who are engaging in corrupt and fraudulent acts do not appreciate the full extent of the harm they are doing. They are ignorant of how much harm they are causing.

We did not possess full knowledge of how stock investing works until Shiller published his breakthrough research in 1981. Had the Stock-Selling Industry not already spent millions of dollars promoting Buy-and-Hold strategies, that research would today be universally regarded as the biggest advance ever achieved in personal finance. But that’s not the way it played out. The industry HAD already spent millions promoting Buy-and-Hold, the OPPOSITE of what works, according to Shiller’s breakthrough research. Thousands of people in this field felt that keeping their high-paying jobs meant keeping millions of middle-class investors in the dark about how stock investing really works. If word got out re what the research says, they would not be viewed as “experts” since they have gotten it wrong for a long, long time.

We have lots of multi-millionaire “experts” putting their self-interest above the needs of their clients and readers. Is it really so hard to believe what has happened? Humans are weak. Tempt a plumber with a million dollars for selling out his clients and he might take that dark path as well. Lots of us would engage in corrupt acts if we could get away with it.

The difference in this field is that there is so much money in it. The Wall Street Con Men have lots of money and lots of power and lots of connections. They can get away with things that people in no other field can get away with, and for far longer time-periods.Many of these people have consciences. They WANT to tell the truth. They would LOVE to be able to tell the truth. They HINT at the truth all the time. But they don’t dare to tell the truth in plain and simple and blunt language. They have seen what has happened to other people who have tried to do this and they want no part of “the treatment” that the Buy-and-Hold Mafia visits on people who “cross” them by putting their clients or readers first and the cover-up of the massive corruption in this field second.

People engage in corrupt acts every day of the week. So, yes, there are “people doing something.” It doesn’t necessarily follow that they possess a full knowledge of what they are doing.

The Wall Street Con Men and the members of their Internet Goon Squads are not convinced that Buy-and-Hold cannot work. They see the holes in the concept. They become insanely defensive when challenged as to their claims that Buy-and-Hold is supported by research. But they have never spent much time exploring the principles of Valuation-Informed Indexing. They prefer to remain in the dark; it makes it easier for them to live with themselves if they don’t know just how dangerous Buy-and-Hold strategies are. So they don’t know.

They tell themselves that maybe Buy-and-Hold is not perfect but that it may work all the same. They tell themselves that, despite whatever flaws there may be in the Buy-and-Hold concept, it may work well enough. They tell themselves there is nothing better (while making sure to keep themselves in the dark re the research-based strategies that really are far superior).

Is that a conspiracy?

It’s not like a conspiracy in which the people responsible for the conspiracy are stealing a million dollars from someone. In that sort of conspiracy, the ones engaging in the conspiracy know precisely what they are stealing and precisely from whom they are stealing it. In this case, the people engaging in trickery do not know how much financial ruin they are causing because they do not want to know. And they are causing financial ruin to themselves as well as to millions of others. The Buy-and-Hold advocates follow Buy-and-Hold strategies themselves. They are ruining themselves while they ruin their clients and readers and million of middle-class investors who need to know how stock investing really works to be able to finance their retirements effectively.

This is a Conspiracy of Ignorance. We learned something very important when Shiller published his “revolutionary” (his word) 1981 research. But we haven’t as a society benefitted from that learning experience because the Wall Street Con Men and their Internet Goon Squads have made sure that the penalty for telling the truth about what the last 33 years of peer-reviewed research in this field tells us about how stock investing works is so great that no one making a living in the field will dare to tell the truth in the simple and plain and clear language that millions of middle-class investors need to hear to make sense of things.

Many, many people in this field long to tell the truth.

But we are going to have to decide as a society that we will stop threatening to kill their loved ones before they will work up the courage to use their talents to help us understand what we all need to understand rather than to keep shoving the long-discredited but oh-so-profitable Buy-and-Hold garbage down all our throats. I say that we should give all these smart and good and hard-working and generous people — and ourselves! — a break and open up every investing board and blog on the internet to honest posting on the last 33 years of peer-reviewed research.

That’s my sincere take re these terribly important matters, in any event.

Rob

“Bogle Says That the Most That Anyone Should Change His Stock Allocation at Valuation Extremes Is 15 Percent. Bogle’s Number Is Off by 400 Percent. The Most Charitable Thing That One Could Say About Bogle’s Number Is That He Pulled It Out of His Backside, That He Never Bothered to Look at the Data.”

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Set forth below is the text of a comment that I recently put to another blog entry at this site:

What do you want Bogle to say exactly, that one might vary their allocation as certain valuation extremes? I’m sure he’d be fine with that.

Bogle says that the most that anyone should change his stock allocation at valuation extremes is 15 percent. He argues that even that much of a change is not a particularly good idea. But he says that a 15 percentage point allocation change is acceptable at the height of a massive bubble.

The most likely annualized 10-year return when stocks are priced as they were in 1982 is 15 percent real. The most likely 10-year annualized return when stocks are priced as they were in 2000 is a negative 1 percent real. An 80 percent stock allocation makes sense in the first scenario. A 20 percent stock allocation makes sense in the second scenario.

Going from an 80 percent stock allocation to a 20 percent stock allocation is a change of 60 percent, not a change of 15 percent. Bogle’s number is off the mark by 400 percent.

That’s not acceptable. It’s not a close call.

The most charitable thing that one could say about Bogle’s number is that he pulled it out of his backside, that he never even bothered to look at the data when giving that number. If that’s the case, he needs to say that. Millions of middle-class people look up to Bogle and expect him to give reasonable investing advice. He dropped the ball re this one in a major way.

And everyone in this field should have been pointing this out going back to the day he first dropped the ball, which was many years ago. Money magazine should have run a cover story pointing out how Bogle dropped the ball. There should be threads at the Bogleheads Forum on a daily basis reporting on how Bogle dropped the ball. There should be bloggers writing articles explaining how he dropped the ball and demanding that he correct the error.

Why are we not seeing that, Anonymous?

We are not seeing it because Bogle has misled millions of investors into believing that the smelly Buy-and-Hold garbage can work. Those people are scared to death of what the research shows. So they become upset when anyone reports honestly and accurately what the research shows. So those whose primary goal is to turn a buck keep it zipped re what the last 33 years of research shows. And we all continue our journey down, down, down.

I ain’t going there, Anonymous.

I never went to Investing School. I never managed a big fund. I acknowledge right up front that I have been wrong about important things before in my life and that it is entirely possible that I am wrong again. I acknowledge that, if I were, I would probably be the last to know.

But I am not going to post dishonestly re the numbers that people use to make important investing decisions. It is not going to happen. Not in 12 years, not in 12 billion years.

Bogle pulled that number out of his backside and he has hurt millions of people by failing to say so. People hear that number and they presume that there is some sort of research or data or expertise or logic behind it. And there is none. It is just a number that one of the Wall Street Con Men pulled out of his backside. Nothing more and nothing less.

I love Jack Bogle. I have learned many important things from him. I learned about the errors in the Old School SWR studies by reading his book. Valuation-Informed Indexing is a bunch of Bogle’s ideas combined with a correction of the one huge mistake he made and has refused to correct for the 33 years since it was brought to light by the peer-reviewed research. It gives me a great feeling of pride to know that I have accomplished what Bogle set out to accomplish as a young man and failed to accomplish at the time because the research he needed to pull it off had not yet been published. I look forward to the day when I can stand next to Old Saint Jack on a stage and talk honestly about what we know about how stock investing works and have him helping out and feel free to give him the credit for all the wonderful insights for which he truly is responsible.

But I want nothing to do with a massive cover-up that in all likelihood is going to end with my good friend Jack being disgraced and humiliated and possibly being sent to live his final days in a prison cell.

Find someone else, you know?

I can’t go for that.

No can do.

It’s not my particular cup of tea.

It’s not a close call.

Rob

“I Only Have Two Choices. I Can Participate in the Cover-Up Myself. Or I Can Tell. I Am Telling.”

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Set forth below is the text of a comment that I recently posted to another blog entry at this site:

Rob, grand conspiracy theories are an indicator of mental illness, nothing more.

I pointed out the errors in the Old School SWR studies in a post dated May 13, 2002, Anonymous.

Today’s date is April 21, 2014.

Not one of the studies has yet been corrected.

That tells the tale.

I don’t call it a “grand conspiracy.” I think it would be reasonable to call it a “conspiracy of ignorance.” That’s something different than what people signify when they use the phrase “grand conspiracy.” There were no people who met in a smoke-filled room and agreed to give bad investing advice until the U.S. economy collapsed.

That said, the reality remains that today’s date is April 21, 2014, and not one of the Old School studies has been corrected as of this morning.

That’s a big problem.

It’s not just that we are going to see millions of failed retirements. That part alone constitutes one of the biggest social crises we have seen as a nation. We are going to have millions of old people left homeless because the Big Shots in The Stock-Selling Industry were not honest enough to acknowledge a mistake they made for 33 years after the peer-reviewed research uncovered it. We obviously cannot as a society leave those people homeless. So there is going to be a government bailout. That is going to explode the Federal budget deficit at a time when most people believe that we should be trying to lower it. This part of the question alone constitutes a catastrophe.

But the massive bailout that will come about as result of the millions of failed retirements is the relatively SMALL problem here.

The bigger problem is the hundreds of people who have participated in the 12-year cover-up, the biggest act of financial fraud in the history of the United States. My good friend Jack Bogle knows about this. He has done nothing. Motley Fool knows about this and has done nothing. Index Universe knows about this and has done nothing. Morningstar knows about this and has done nothing. Lots of my blogger friends know about this and have done nothing.

I am telling, Anonymous.

I only have two choices. I can participate in the cover-up myself. Or I can tell. Participating in the cover-up myself means that I go to prison too. ZERO INTEREST. Telling means that a good number of my friends go to prison. I don’t like that outcome. But that is what I have been left with, presuming that I don’t want to go to prison myself. So we are back to ZERO INTEREST.

You call it whatever you like. Call it a conspiracy if you must. Call it a Conspiracy of Ignorance if you want to be more accurate. Call it something altogether different if doing so makes you happy.

But please don’t ever pin any hopes on the thought that I might add my name to the long list of people now associated with this massive act of financial fraud.

I am telling.

If you can stop me, stop me.

If you cannot stop me, word will get out.

That’s where it stands. There will be no negotiation on this point.

I naturally wish you all good things.

Rob

“It’s a Lot Easier to Make the Shift from Buy-and-Hold to Strategy B Than It Is to Make the Shift from Buy-and-Hold to Valuation-Informed Indexing. And It Is a Lot Easier to Make the Shift from Strategy B to Valuation-Informed Indexing Than It Is to Make the Shift from Buy-and-Hold to Valuation-Informed Indexing.”

by

Set forth below is the text of a comment that I recently posted to another blog entry at this site:

I think we need a label for what everyone on Bogleheads does — let’s call it Strategy B. Strategy B says: “Historical data shows valuations explain some of the variability in future stock returns. If I choose to, and it makes sense for my circumstances, I may vary my asset allocation based on them.”

What do you think of Strategy B? Since it sounds like what you employ personally, and what most other investors (including myself) use, isn’t this a general system we can all agree on? If now, how is it flawed?

I agree that Strategy B is what most people follow today, Anonymous.

I certainly have no objection if people follow it. People should follow what they believe in. Lots of people believe in what you call “Strategy B.” They are right to follow it.

I don’t follow Strategy B. And it’s not true that all Buy-and-Holders follow Strategy B. I agree with you that most do. But I don’t believe that John Greaney follows Strategy B. I don’t believe that Eugene Fama follows Strategy B. Greaney and Fama are Buy-and-Hold purists. I am a Valuation-Informed Indexing purist.

The only problem I would have with Strategy B being “a general system we can all agree on” is if making that the general system means that the Buy-and-Hold purists and the Valuation-Informed Indexing purists cannot speak their minds.

We do not today know all there is to know about how stock investing works. Perhaps the Valuation-Informed Indexing purists are right. Perhaps the Buy-and-Hold purists are right. Perhaps the Strategy B people are right. Members of all three groups should express their sincere views and members of the other groups should show them respect when they are speaking. In time, one of the three groups will win the day. But we are just not there yet.

You are saying something important when you say that Strategy B is the most popular belief system today. That really is so. The problem for me as a Valuation-Informed Indexer is that most people view Strategy B as an offshoot of Buy-and-Hold and view both Strategy B and Buy-and-Hold as “acceptable” strategies. Valuation-Informed Indexing, in contrast, is viewed as “out there” and hard to accept.

Valuation-Informed Indexing will not become more popular over time unless people hear about it and are able to ask questions about it. So I need to open up space for debate over Valuation-Informed Indexing at every board and blog. I have no intention of closing up space for Buy-and-Hold or for Strategy B when doing that. My intent is a positive one, not a negative one. I am trying to add something, not to put an end to something (except to the extent that that something tries to put an end to Valuation-Informed Indexing before it even has a chance to grow into something big).

I view this as an encouraging post. If you are checking with me as to whether I am okay with the idea of all “sides” taking a less dogmatic position re what they believe in, I support that effort 100 percent and want to do anything in my power to see that it is successful.

I don’t personally believe that Strategy B is the right answer in an ultimate sense. But it IS more popular than either of the two purist approaches and it is also less dogmatic than either of the two purist approaches, which is a plus from a process standard. If there is ever going to be a time when large numbers of people are going to become Valuation-Informed Indexers, there probably is first going to need to be a time when there is widespread support for Strategy B.

It is a lot easier to make the shift from Buy-and-Hold to Strategy B than it is to make the shift from Buy-and-Hold to Valuation-Informed Indexing. And it is a lot easier to make the shift from Strategy B to Valuation-Informed Indexing than it is to make the shift from Buy-and-Hold to Valuation-Informed Indexing.

Helpful post. I hope we can work together to use it to take us all to good places.

Rob